Recent legislation is challenging the classification of real estate professionals, providing NAR with tips for brokerages on worker classifications.
Real estate professionals’ classification as independent contractors could be put at risk under the Fair Labor Standards Act (FLSA). A recent Department of Labor rule may misconstrued, leading to greater litigation and confusion around classification issues; additionally, this rule could hinder their ability to work in this capacity as independent contractors; including most real estate professionals.
The National Association of REALTORS(r) has long advocated for laws to safeguard real estate professionals’ independent contractor status and will work tirelessly to advance H.R. 5419(link is external) as part of an effort to get an exemption for real estate agents under FLSA.
Reclassification could result in increased costs, fines, tax withholding obligations and payment of minimum wages; disappointing salespeople who desire control over their work. Matt Troiani, NAR’s Senior Counsel and Director of Legal Affairs explained in the latest “Window to the Law” video.
Under current Internal Revenue Code rules, real estate professionals are classified as independent contractors by their brokerage; however, DOL rules affect worker classification under FLSA (Labor Law of Fair Labor Standards Act), leading real estate industry players to worry that regulations, legislation or proposed tests could jeopardize certain classifications at either federal or state levels.
At present, nearly 89% of NAR members are classified as independent contractors according to NAR data, with most working for independent real estate companies. “Many salespeople prefer working independently so they can decide when, how and where they perform their duties,” Troiani notes.
“One reason many individuals are attracted to real estate is its classification as independent contractor – this classification enhances entrepreneurship, maximizes flexibility and fosters autonomy,” wrote NAR and the Direct Selling Association in a letter addressed to lawmakers earlier this fall(link is external).
